On Monday, Federal Reserve Bank of St. Louis President James Bullard said an additional two interest rate hikes are expected in the near future, both of them totaling 50 basis points (bps) in all amid efforts to cool down inflation. 

"This year, I am expecting two more rate hikes,” Bullard said in a live-streamed speech. "The Fed will have to go higher on the policy rate, perhaps 50 bps more [in] hiking this year. I think we're going to have to grind higher with the policy rate in order to put enough downward pressure on inflation to return inflation to target in a timely manner."

Federal Reserve Bank of St. Louis President James Bullard said he expects the central bank will need to raise interest rates twice more this year to quell inflation https://t.co/aNLVTT3UA4 pic.twitter.com/7ItE4DZB81

— Bloomberg TV (@BloombergTV) May 22, 2023

Since the end of the pandemic in March 2022, the Fed raised the interest rate by ten times. This totals about an additional 500 basis points or 5%, bringing rates to a peak of 525 basis points or 5.25%.

In the last interest rate hike of 50 basis points or 0.25% on May 2, Fed watchers said they will keep a close eye on data and assess the effectiveness of hikes in return to the inflation target of 2%. 

But Bullard is now suggesting that hikes should continue. 

"The core measures of inflation have not changed much in the recent months,” Bullard said. "Households are still flush [with money] … and … will continue to support consumer spending. If inflation is not controlled, the Fed will have to do a lot more and should err on the side of doing more."

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In June 2022, inflation reached its highest in forty years, increasing at an annual rate of 9.1%. In March of this year, the Fed's Personal Consumption Expenditures (PCE) Index grew by just 4.2%. Despite this, the Fed still considered that inflation was excessive as it exceeds the 2% mark. 

"I want to fight inflation while the labor market is strong," Bullard said.

Two factors have been identified by the Fed as key drivers of inflation, namely job and wage growth. 

The pandemic has had a devastating impact on the labor market, with millions of Americans forced to be laid off due to the restrictions. 

Since June 2020, millions of jobs have been added in efforts to compensate for the loss of 20 million jobs. 

On another note, average monthly wages have increased steadily and without a halt since May 2021.

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